3 Stocks Pushing The Aerospace/Defense Industry Lower

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The Aerospace/Defense industry as a whole closed the day down 0.7% versus the S&P 500, which was up 0.2%. Laggards within the Aerospace/Defense industry included Acorn Energy ( ACFN), down 6.9%, Frontline ( FRO), down 2.6%, Hexcel ( HXL), down 4.1%, B/E Aerospace ( BEAV), down 3.3% and Boeing ( BA), down 2.3%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

Hexcel ( HXL) is one of the companies that pushed the Aerospace/Defense industry lower today. Hexcel was down $1.65 (4.1%) to $38.39 on heavy volume. Throughout the day, 2,026,871 shares of Hexcel exchanged hands as compared to its average daily volume of 735,300 shares. The stock ranged in price between $38.32-$39.76 after having opened the day at $39.52 as compared to the previous trading day's close of $40.04.

Hexcel Corporation, together with its subsidiaries, engages in the development, manufacture, and marketing of lightweight and high-performance structural materials for use in commercial aerospace, space and defense, and industrial applications. Hexcel has a market cap of $4.0 billion and is part of the industrial goods sector. Shares are down 10.4% year-to-date as of the close of trading on Tuesday. Currently there are 7 analysts who rate Hexcel a buy, 1 analyst rates it a sell, and 2 rate it a hold.

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TheStreet Ratings rates Hexcel as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, increase in net income and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from TheStreet Ratings analysis on HXL go as follows:

  • HXL's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 10.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
  • HEXCEL CORP has improved earnings per share by 16.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HEXCEL CORP increased its bottom line by earning $1.85 versus $1.61 in the prior year. This year, the market expects an improvement in earnings ($2.13 versus $1.85).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 14.9% when compared to the same quarter one year prior, going from $43.60 million to $50.10 million.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

You can view the full analysis from the report here: Hexcel Ratings Report

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At the close, Frontline ( FRO) was down $0.07 (2.6%) to $2.63 on light volume. Throughout the day, 508,544 shares of Frontline exchanged hands as compared to its average daily volume of 944,100 shares. The stock ranged in price between $2.57-$2.75 after having opened the day at $2.75 as compared to the previous trading day's close of $2.70.

Frontline Ltd., through its subsidiaries, is engaged in the ownership and operation of oil tankers and oil/bulk/ore carriers. The company provides seaborne transportation of crude oil and oil products, as well as raw materials, such as coal and iron ore. Frontline has a market cap of $241.2 million and is part of the industrial goods sector. Shares are down 27.8% year-to-date as of the close of trading on Tuesday. Currently there are no analysts who rate Frontline a buy, 1 analyst rates it a sell, and 4 rate it a hold.

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TheStreet Ratings rates Frontline as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally high debt management risk.

Highlights from TheStreet Ratings analysis on FRO go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, FRONTLINE LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for FRONTLINE LTD is currently lower than what is desirable, coming in at 31.31%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, FRO's net profit margin of -7.10% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio is very high at 1231.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, FRO's quick ratio is somewhat strong at 1.36, demonstrating the ability to handle short-term liquidity needs.
  • FRONTLINE LTD has improved earnings per share by 43.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FRONTLINE LTD reported poor results of -$2.38 versus -$0.91 in the prior year. This year, the market expects an improvement in earnings (-$0.60 versus -$2.38).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 35.6% when compared to the same quarter one year prior, rising from -$18.76 million to -$12.09 million.

You can view the full analysis from the report here: Frontline Ratings Report

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Acorn Energy ( ACFN) was another company that pushed the Aerospace/Defense industry lower today. Acorn Energy was down $0.16 (6.9%) to $2.22 on light volume. Throughout the day, 138,133 shares of Acorn Energy exchanged hands as compared to its average daily volume of 487,000 shares. The stock ranged in price between $2.18-$2.37 after having opened the day at $2.37 as compared to the previous trading day's close of $2.39.

Acorn Energy, Inc., through its subsidiaries, provides technology driven solutions for energy infrastructure asset management worldwide. It offers oil and gas sensor systems, a fiber optic sensing system for the energy, commercial security, and defense markets. Acorn Energy has a market cap of $51.9 million and is part of the industrial goods sector. Shares are down 41.3% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates Acorn Energy a buy, no analysts rate it a sell, and 1 rates it a hold.

TheStreet Ratings rates Acorn Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

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Highlights from TheStreet Ratings analysis on ACFN go as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, ACORN ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ACORN ENERGY INC is currently lower than what is desirable, coming in at 34.06%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -96.63% is significantly below that of the industry average.
  • ACFN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 74.84%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The revenue fell significantly faster than the industry average of 9.4%. Since the same quarter one year prior, revenues fell by 22.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • ACORN ENERGY INC has improved earnings per share by 32.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ACORN ENERGY INC reported poor results of -$1.60 versus -$0.94 in the prior year. This year, the market expects an improvement in earnings (-$0.54 versus -$1.60).

You can view the full analysis from the report here: Acorn Energy Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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